An Alberta court decision this June directly disagreed with
recent Ontario decisions regarding the appropriate factors to
consider when a non-resident defendant challenges the jurisdiction
of a Canadian court in a contract dispute.

In Bansal v Ferrara Pan Candy
Co.,1 Madam Justice Veit of
Alberta's Court of Queen's Bench sheds light on appropriate
factors to consider when a party challenges the jurisdiction of a
Canadian court in a contract dispute. This decision also provides
guidance regarding what steps by a defendant prior to a challenge
can constitute submission to the jurisdiction so as to preclude a
successful challenge.

In Ferrara Pan Candy, the Alberta judge directly
disagreed with two recent Ontario Superior Court of Justice
decisions that seem to suggest an expanded set of factors may
connect a contract dispute and the court's jurisdiction.
Staying true to the Supreme Court of Canada's leading decision
in Club Resorts Ltd. v Van Breda,2 the
Alberta court declined to follow the Ontario decisions and looked
no further than Alberta's Rules of Court for the factors that
would allow it to find jurisdiction.

The proceeding

In Ferrara Pan Candy, the judge had to decide whether
the courts of the province of Alberta had jurisdiction to hear a
dispute over an alleged breach of contract and the commission of
various non-contractual wrongs. If jurisdiction were found to
exist, the court then had to decide if Alberta was the most
appropriate forum to adjudicate the dispute. The plaintiffs'
claim essentially alleged that the defendants had breached
contracts, conspired against the plaintiffs, and intentionally
interfered with their economic interests regarding their exclusive
rights to distribute the defendants' confectionary in
Canada.

Early in the proceeding, the defendants brought an application
to have the plaintiffs' solicitors disqualified from
prosecuting the claim because an affiliated firm had previously
acted for minority shareholders of the defendant Ferrara Pan Candy
and, as corporate lawyers for the company, had investigated and
researched some of the very allegations made in the plaintiffs'
claim. The plaintiffs' solicitors subsequently gave notice of
ceasing to act in the proceeding, so the application to remove them
did not need to be heard.

The defendants then challenged the jurisdiction of the Alberta
courts to hear the dispute.

Resisting the jurisdiction challenge, the plaintiffs argued that
the defendants had submitted to Alberta's jurisdiction when
they brought their application to disqualify the plaintiffs'
solicitors. The judge found that the defendants had not submitted
to the court's jurisdiction by bringing their application for
the removal of the plaintiffs' solicitors.

Ultimately, while the judge found that the Alberta courts did
indeed have jurisdiction over the subject matter of the dispute,
she determined that Alberta was not the most appropriate forum for
the adjudication of the matter. She declined jurisdiction in favour
of the courts of the province of Ontario or, alternatively, the
state of Illinois in the United States.

No submission to the jurisdiction of the Alberta courts

Neither counsel nor the court was able to find a decision
directly on point regarding whether the defendants, in bringing
their disqualification motion, had submitted to the jurisdiction of
the court.3

The judge relied on Norex Petroleum Ltd. v Chubb Insurance
Co. of Canada4 to find that it would have been
possible for the defendants to submit to the Alberta courts'
jurisdiction because, where a court already has jurisdiction over
the subject matter of a dispute, a defendant's
consent—express or implied—can constitute
submission.

However, the defendants had not submitted by bringing the
removal application. That application raised a professional conduct
issue and not an issue on the merits of the claim; attempting to
disqualify the solicitors did not go to the merits of the dispute
between the parties. While the circumstances of each case must be
examined to determine whether a party has submitted to the
jurisdiction of the court with respect to the merits of that case,
the judge found that in this dispute the merits were not
engaged.

Procedurally, it was necessary for the defendants to bring the
removal application prior to the jurisdiction challenge because the
firm had the potential to breach its duties of loyalty and
confidentiality. The confidential information, which the
plaintiffs' lawyers had presumably acquired, related directly
to the plaintiffs' allegations and they might have been able to
use the information in not only prosecuting the claim, but also in
resisting the jurisdiction challenge. Effectively, the defendants
had no choice but to bring the disqualification application first
because they perceived that the plaintiff had an unfair
advantage.

Alberta has jurisdiction by formation of the contract

The judge noted there have been relatively few post-Van
Breda appellate cases identifying the factors in contract
cases that allow a court to take jurisdiction over a dispute. These
factors, called "presumptive connecting factors," are
indicators that a jurisdiction has a "real and substantial
connection" to a contract and a court therefore has
jurisdiction over disputes about that contract. Following the lead
of the Supreme Court, Madam Justice Veit looked to the Alberta
Rules of Court5 for guidance as to what the
presumptive connecting factors are in Alberta for contracts and
what constitutes a real and substantial connection between a
contract and the province.

The judge found four presumptive connecting factors for
contracts cases, in a manner consistent with the Supreme
Court's directions in Van Breda regarding how
presumptive connecting factors for tort cases should be determined.
The four presumptive connecting factors that may ground
jurisdiction in contract cases in Alberta are:

the defendant is resident in Alberta;

the defendant carries on business in Alberta;

a contract or alleged contract is made, performed or breached
in Alberta; and

a tort connected with the contract was committed in
Alberta.

Any one of these connecting factors can furnish the Alberta
court with jurisdiction over a contract claim.

The contract was found to have been made in Alberta and the
province's courts therefore had jurisdiction over the subject
matter of the dispute.

Alberta not the most appropriate forum

The court found that, despite the Alberta courts'
jurisdiction, the province was clearly not the most appropriate
forum in which to adjudicate the plaintiffs' claim. The court
cited many factors in support of its finding, including that: the
defendants were resident in Ontario and Illinois and their alleged
wrongdoing would have been committed in those jurisdictions; the
contract was varied several times outside of Alberta; few Albertan
witnesses were required; and most records relating to the claim
were probably in Ontario. Further, there was no evidence the
plaintiffs would suffer any legal disadvantage if the proceeding
were brought in Ontario or Illinois, and there would be no
difficulty having an Ontario judgment recognized in Alberta. Either
forum was found to be more appropriate than Alberta.

Presumptive connecting factors in contracts cases: where to
from here?

The post-Van Breda jurisprudence on presumptive
connecting factors in contracts cases is sparse. Ferrara Pan
Candy clearly reflects that while Van Breda was a
tort case, it represents a clear direction from the Supreme Court
on how new presumptive connecting factors should be established for
contract cases as well. The judge in Ferrara Pan Candy
properly recognized the factors that connect a contract to the
jurisdiction of Alberta in a manner consistent with the method set
out for recognizing new factors for tort claims in Van
Breda.

This case comes on the heels of two Ontario
decisions6 that seem to depart from Van
Breda's values of promoting clarity, predictability and
consistency in jurisdiction cases—decisions Madam Justice
Veit disagreed with and rejected.

The Ontario cases seem to suggest (but do not decide) that other
factors—such as where the subject matter of a contract is
generally located, where witnesses are located, and where actions
were taken on the contract—might also be new presumptive
connecting factors. As Her Ladyship pointedly remarked in
Ferrara Pan Candy, these factors are not presumptive
connecting factors and do not establish the presumption of a real
and substantial connection with Alberta. These factors are solely
for determining whether another forum is clearly more appropriate
to hear a dispute rather than whether a court has jurisdiction over
a contract dispute in the first place.

It remains to be seen whether other Canadian courts will stay
true to the Supreme Court's Van Breda directive and
strive to maintain clear tests and predictability in jurisdiction
decisions, or whether judges will once again wade into the murky
waters of allowing factors that should not create the presumption
of a real and substantial connection to influence jurisdiction
findings, instead of considering them in the appropriate forum
analysis where they are properly relevant.

Eugene Bodnar of Norton Rose Fulbright's Transnational
Litigation team was counsel for the plaintiffs in Norex Petroleum v
Chubb Insurance, successfully opposing an application brought by a
Russian insurer that asserted Alberta was not the appropriate forum
to hear a claim for a declaration as to coverage in relation to
oilfield equipment seized in Russia.

Footnotes

1 2014 ABQB 384.

2 [2012] 1 SCR 572.

3 Practitioners should note that, in Skagway Terminal
Co. v The Ship "Daphne" (1987), 42 DLR (4th) 200,
the trial division of Canada's Federal Court found that the
defendant had not submitted to the jurisdiction when it provided
the plaintiff with an undertaking, prior to the commencement of the
claim, that the defendant's solicitors in the jurisdiction
would accept service of any process, which undertaking expressly
reserved all of the defendant's rights. Such an express
reservation of rights should be considered with respect to any
preliminary steps taken by a non-resident defendant that may
subsequently challenge the jurisdiction of a Canadian
court.

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